Understanding your credit score.

Factors that impact your credit score.

Your credit score is a numerical representation of your credit and debt history at a given time. Lenders use this score to evaluate your reliability in repaying debts and managing credit.

In Australia, credit scores and credit history are maintained by three different organisations known as credit reporting agencies. These agencies are Experian, Illion and Equifax.

Credit scores range between 0 and either 1,000 or 1,200, depending on the agency. The higher your score, the more favourably potential lenders will view you. Banks and other lenders request information about your credit history from these organisations.

Factors that impact your credit score.

The following things will generally have a positive impact on your credit score:

• Payment history – timely payment of bills is the most significant factor affecting your credit score.
• Credit utilisation – keeping your credit card balances low relative to your credit limit.
• Length of credit history – longer credit histories can improve your score.
• Types of credit – having a mix of credit accounts such as credit cards, personal loans and mortgages can improve your score.
• Recent credit activity – applying for a modest amount of credit recently can improve your score.

The following things may have a negative impact on your credit score:

• Late payments – missing payments or making them late can lower your credit score.
• High credit utilisation – maxing out your credit cards or having high balances relative to your credit limit can lower your credit score.
• Short credit history – having a short credit history can lower your score.
• Too many credit inquiries – multiple credit applications (or inquiries to process these applications) in a short period of time can lower your score.
• Defaulting on loans – things like bankruptcy and foreclosure on loans have a big negative impact on your score.
• Short-term credit, such as pay day loans.

It’s important to know that some things won’t normally impact your score. These things include:

• Checking your own credit score. When you check your credit score, these are referred to as “soft inquiries” and they don’t affect your score.
• Your income level. Your income level doesn’t affect your score (but of course, it may be considered by a lender when they assess your borrowing capacity).
• Demographics. Things like your sex, race and marital status don’t affect your credit score.

We’re here to help.

For more information about your credit score, how to improve it or to discuss loan options suitable for your circumstances, contact your local branch or call us on 13 25 85. We’re here to help.